The 'chip concentration' data cannot be used as a basis for directional judgment, so is there any reference indicator that can assist in judging direction? Of course! For example, the 'exchange purchasing power monitoring' indicator is one of them.
Its usage is very simple: waveforms above the zero axis (green) represent an increase in purchasing power, while those below the zero axis (red) indicate a decrease in purchasing power. As a provider of market liquidity with direct pricing power over BTC, the purchasing power of exchanges can almost be equated with price action.
For example: In Figure 1, the signal bar at the bottom changes from blank to the appearance of the first blue signal, indicating a transition of the exchange's purchasing power from decay to recovery, that is, a change from 0 to 1. Often at this time, it is very likely to be the starting point of a trend reversal.
But this is not a 100% certain matter; it may just be a rebound. However, in any case, as mentioned earlier, it can serve as a directional reference: when the signal is 'from having to none', the probability of going down is greater; while when the signal is 'from none to having', the probability of going up is greater.
To give another example: During the black swan event on May 21, BTC had already fallen from a high of 63,000 to 37,000; at this time, we saw that the 'exchange buying power' signal indicated 'from having to none', and it continued to decline until July 20 when the first blue signal appeared to start reversing.
After that, this signal also appeared multiple times with the situation of 'from none to having', but due to the limited growth of exchange buying power in the later stages (the green waveform was not high enough), ultimately, they were all just rebounds.
Summary:
Currently, we have seen the appearance of the 'first blue signal', indicating that buying power has started to recover to positive; although it does not mean a reversal will happen immediately, it is better to have it than not. Without this signal, it may not even be possible to anticipate a rebound. Any judgment indicators are only 'assists', meaning they are not 100%, but indicate which direction has a higher probability. The real key is whether the green waveform can continue to rise; with each step up, the certainty becomes greater.
